Northern District of Texas Blog

On December 11, 2019, the United States Supreme Court issued its unanimous decision in Peter v. NantKwest, Inc. (available here). The statute-at-issue was 35 U.S.C. § 145, which allows an applicant who is dissatisfied with the decision of the Patent Trial and Appeal Board (in an appeal under Section 134(a)), to file a civil action against the Director of the Patent Office in the United States District Court for the Eastern District of Virginia. Section 145 further specifies that “[a]ll the expenses of the proceedings shall be paid by the applicant.” At issue was whether “expenses” included the Patent Office’s attorney’s fees (i.e., the salaries of attorney and paralegal employees of the PTO working on the matter). Notably, the PTO had not previously sought to recover attorney’s fees under the statute in the statute’s 170-year history, but did so for the first time in this case. The district court rejected the PTO’s argument, a panel of the Federal Circuit accepted it, and then the Federal Circuit convened en banc and ultimately rejected the argument.

The Supreme Court held that “expenses” do not include attorney’s fees, holding that the statute’s language did not suffice to depart from the “American Rule”—i.e., the general rule that each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise. The Supreme Court further noted that there is a presumption in every statute against fee shifting. Further, Congress did not provide a sufficiently “specific and explicit” indication of its intent to overcome the American Rule’s presumption against fee shifting in Section 145. Simply put, the “reference to ‘expenses’ in § 145 does not invoke attorney’s fees with the kind of ‘clarity we have required to deviate from the American Rule’”, especially where multiple statutes use the terms “attorney’s fees” and “expenses” in tandem (i.e., Congress has previously understood the two terms to be distinct and not inclusive of one another).

On June 24, 2019, the Supreme Court issued its decision in Iancu v. Brunetti (available here). The Supreme Court found that the Lanham Act’s ban on registering trademarks that are “immoral or scandalous” violated the First Amendment and, accordingly, struck the ban down.

This result was anticipated, as two Terms ago, the Supreme Court in Matal v. Tam struck down a statute banning the registration of “disparaging trademarks.” The Supreme Court found that both bans impermissibly disfavor certain ideas under the First Amendment.

On May 20, 2019, the Supreme Court issued its opinion in Mission Product Holdings, Inc. v. Tempnology, LLC (decision available here). At issue was whether, when a bankruptcy trustee rejects a trademark-licensing executory contract under 11 U.S.C. § 365(a), the rejection of such a contract deprives the licensee of its right to use the trademark-at-issue.

(11 U.S.C. § 365(a) generally allows a bankruptcy trustee to “assume or reject any executory contract” of the debtor. An “executory” contract is a contract that neither party has finished performing. A debtor’s rejection of a contract under Section 365(a) “constitutes a breach of such contract.” 11 U.S.C. § 365(g). But the breach is deemed to occur “immediately before the date of the filing of the [bankruptcy] petition,” rather than on the actual post-petition rejection date, see 11 U.S.C. § 365(g)(1), which means that the breach-of-contract claim against the bankrupt estate is “unlikely to be ever paid in full.”)

The Supreme Court held that the debtor-licensor’s rejection of the trademark-licensing contract does not deprive the licensee of its right to use the trademark. In other words, a rejection of the contract breaches the contract, but does not rescind it. As such, “all the rights that would ordinarily survive a contract breach, including those conveyed here, remain in place.”